HGTY - Earnings call transcript Q4 2023

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Operator

Greetings. Welcome to Hagerty's Fourth Quarter 2023 Earnings Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to Jay Koval, Senior Vice President of Investor Relations. you. Thank

begin. may You

Jason Koval

Hagerty, and to everyone, the discuss I'm by of operator, McClymont, and for Financial Chief fourth thank joining XXXX. Officer. McKeel morning this us Hagerty's joined Executive good you, Officer; and Patrick morning, you quarter Chief Thank results for

During at Investor an of Relations presentation this the we investor.hagerty.com. is that company's to conference refer call, website section available morning's corporate will accompanying on Hagerty's

also are on Our stockholders accompanying covering website. earnings the slides to period release, IR letter and this posted

Our is press filing also X-K with available our release there earnings materials. along and other

Today's and the described earnings contains financial of further metrics discussion as forward-looking statements presentation. X on Slide non-GAAP

expected of results to statements that They future financial business actual performance. and are risks could subject cause from guarantees materially Forward-looking our performance a to and of statements are include uncertainties variety future expectations. our not about differ and promises or

discussion results, website which could available and sec.gov. of the SEC, our important are For to risks our with at that in Relations Investor refer contained please on factors material filings a actual and also our affect those

further directly appendix GAAP non-GAAP financial most of the measures presentation our The to morning's the that also reconciliations metrics X-K this of contains supplemented are filing. by comparable

And and with to CEO. that, over I Founder will turn our McKeel, the call

McKeel Hagerty

Fourth join Thanks, Earnings Jay, and good Call. morning, you taking Quarter XXXX Hagerty's everyone. time to appreciate the We

XXXX. collectible days million Team as lovers will is the snow grow and Hagerty work the adventures As Hagerty's their enthusiasts buy, excellent XX our help for vehicles XXXX. driving melt results year to the our the with sell products we One to car array share as outlook last longer, services. are for the hard winter over initial there from beginning United to plan begins and well Today, and to of enjoy in auto protect, States And

A XXXX actual revenue XX% us first year X revenue total years. taking by powered our just our growth of initial XX%. with well growth Slide our and further rapidly past ago, XX% start increased accelerated to for outlook membership to our XXXX's of grew compares results. expected Total billion with X, for revenue guidance which doubling premium XX% up written growth. XXX%, ahead growth in the again, XX% respectively. the and growing was $X initial in Let's was we over million and and XX% XXXX quota Revenue in from ever time revenue XX% revenue marketplace businesses, by $XXX Actual share

by high-growth importantly, full we We that high operating of of and improved profitability the one enormous year in companies very margins growth. revenue More take impacting significantly delivering few improved rates margins on XXX pride without negatively executed basis our points. being

EBITDA Adjusted margins. to $XX of million $X increased this toward peak prior and XX% $XX million past of million as back negative outlook came year, positive XXXX million a Adjusted eventually $XX higher EBITDA $XX in our from move initial than we million in improvement.

our restructuring and commitment to year profitable objectives strategic our processes results X,XXX and to business for I team These are passion to colleagues our our drive work, over with hard after want exceptional Hagerty just serve their and X expertise. customers excellence growth. thank to of partners

expectations to road the high exceed new from against clear over growth map in to drive created we the our our to challenge path rose XXXX plus years allowed as have quarter and after team of a organic deliver growth quarter rates multiyear and we revenue Our Hagerty to coming partnerships. execute profitable

the increases double-digit year rate key as risk with growth Hagerty other premium and industry includes growth we in evolution results and on of XX%, to earned by value towards dig an commission assuming highlights into continue share Reinsurance, is and in XXXX as struggling from shown full of increased fueled our with gaining now revenue In This written stable written the proposition brand XX%, XX% premium our results Slide Hagerty strong more quota due jumped premium Let's few underwriting a level premium our entity, the our to underwriting of risk-taking associated share increases. capabilities. and X. our

Club well revenue member revenue described at $XX Membership high this million pricing as X. growth fueled of Hagerty Slide new Marketplace $XX and was XX%, on by increased in and growth as rate single-tier of marketplace other Drivers

saw policies Farms, under to during we the X September, Farm states the majority shown X, in in on in states the agents Classic+ quarter. State fourth launched of and those begin State Slide new sell program

Farm premium become existing XXXX, State convert of meaningful the We states State the as million to administered Hagerty. incremental Classic+ written add program we driver in X.X growth into classic a other and expect by policies Farms

seasoned banner our and of Autopay. and we highlights priorities, and Hagerty lower add rates the Slide of we renewals over new our million help X referrals. first, to policies initiatives, year most marks referrals. of drive year one XXXX, to business, margin given to ways X.XX growth through these profitable expect is including: lower costs to improving well grow another This loyalty XXXX our XXth from expansion. are In anticipating XXXX drive including in and us retention members recent loss and acquisition initiatives ratios of higher

are efficient reduce smart Second, us variable as help cost-effective and we enhancing should grow. experience way, continued technology margin a we in fuel to expansion member leveraging This costs. the

and place most Third, trusted will preferred to Marketplace into we continue building vehicles. the buy sell collectible Hagerty and

prior high the from year. number with XXX,XXX $XX large rates XXXX, sellers. also benefits the and growing our value Marketplace total with double-digit sold of are across established from and the increase of that vehicles sold closed our billion, consumers. auctions representing of bought in our future vehicles books In attract a time-based were over We base a steadily over value

as The more move with opportunity is attractive online. very margins large transactions more and

and use platform offerings carrier the increasing profits, company And market cohort. over to flexibility including of the particularly enthusiast to insurance launch finally, control fill our new post-XXXXs announced new underwriting and We we today, recently underserved low and an our of where products coverage this acquisition our classic intend penetration segment the the CNIC. is called are to

The Enthusiast launched on for program Plus coverage to will be which XXXX requests enable will we of in us inbound expansion an current vehicles. Hagerty offering, enthusiast Flex and decline fewer our

invest XXXX to lengthen rates another our more of leadership to We leaner, our our advantages competitive year for high we stakeholders can become and are after year position. and great for self-fund excited company growth that stronger a as be profitable in year

Let more the me as outlook Patrick well fourth the as to XXXX in call now to turn financial for detail. over run the through quarter

Patrick McClymont

and you, McKeel highlights morning, shared Thank year XXXX. of some the good the from everyone. full

X So on X. let's dig results quarter into Slides and shown the fourth

total business retention decreased the hold. XXXX. and compared strong quarter, quarter Commission Membership, growth XX% to count the results. with million take fee in bump $XX premium premium began we and fourth other to a million, the delivered to of written and as XX% early In initiatives in XX% robust of Marketplace to underwriting revenue growth $XXX million to fourth to by revenue new $XX powered X% written revenue and gains jumped due

resulting quarter As we that a in repeat year's a decline. auction year, year-over-year chose we hosted this not the reminder, live last fourth to during

increased our we escrow. by well value the services, and growing and we at for certification title trust build is marketplace vehicles as same confidence online volume approach that sold, Our steadily offering instills the time, of awareness differentiated and

end To the out at of $XX help build our quarter. a facility lending we activities, the entered asset-based into million credit

Our new increase our and to premium premium XX% contractual grew million, driven quota in $XXX reinsurance earned share. by the growth XX-point

We stable thanks at and to ensuring highly ratio historical with treated of well vehicles levels. by loss that Our decades predictable results, deliver consistent owners. in their are experience came XX.X%, underwriting

loss we XX, an Slide $X basis prior a million, on million reported expanded $XX of margins operating shown points. as profitability, X,XXX to year the fourth of over period improvement by quarter Turning

program, and expansion the impressive is people we opportunities. margin as to platform the of making tech This spend later and of technology Plus Enthusiast Hagerty's we in ramped marketplace, we build invest technology support technology launch to necessary with our more out up Classic long-term rollout Farm and have are even XXXX. online includes as growth implementation continued in insurance State Our additional the thoughtfully investments

net driven $X as related well our $X compared In of fair $XX the million The quarter fourth earlier. warrants. significantly in income the private operating million income to million a adjustment loss was and improved of delivered million public improvement in a $XX we margins by the as aggregate, value to a year swing net primarily

A average common was $X.XX based share XX per of earnings basic shares outstanding. Class stock million GAAP weighted on

improvement million EBITDA during prior million, was year million fourth over during $X quarter $XX the the loss period. Our the a $XX adjusted

$XXX year jumped sheet. came full and now unrestricted efforts cash resulted debt. will decline was margins, Operating our Full at contingent of in me Cash over and to Let And in only our over commission receiving $XX the our to end XXXX points years. even as million in underwriting by the at XXXX initiatives in of million XXX% liquidity coming from cash drive G&A. and basis $XXX our long-term $XX in exceeded cash payment turn margin million. with growth flow drive year profitable helped expansion XXX a income December our X% million, February, to productivity Markel operating after stronger of balance flow net XXXX generation the flow cash

on payments CUC a monthly be made forward, Going will basis.

wrap up Let with on Slide outlook shown our XXXX XX. me

an another for in cared record top to line base. strong XX% yet sharing growth consistently XX% durable premium year we momentum as written to we business, the top XX% outlook and growth line initial of by to expect membership additions in Given are revenue our our XX%, of

year business carried February. year and incorporates start strong as outlook full a into XXXX to momentum the January Our has

double-digit built value, and doubling has to stronger, range favorable proposition $XXX $XXX million, around to never million the of single of net to growth. $XX value strong in operating low automotive with to digits bottom million, to versus expect rate than industry's and XXXX, EBITDA income been expertise leverage increases XX% XX%. to Hagerty's of line, we $XX the the a In growth XXX% up million more XXX% guaranteed adjusted

be under XX%. to similar anticipated at is XXXX ratio to Combined

excellent service to equates turns and our business you since of to range XXXX expect branded for are which with model. as deliver known, a model over the EBITDA Our margins have the from we refined we would margins great but business XX% incremental

Plus for Equally over up in investing strategically XXXX. in company Enthusiast State the rates we to growth sustained are years our as of ramps late business Farm important, coming position launch we high and XXXX the

adjusted double-digit our after flow the deliver allows to is significantly This for margins investments coming track XXXX, incremental and on executing ambitious a shareholders. to to plan are setting return to cash we and levels. back targets summary, the low us both But years. well grow these are the in XX% In foreseeable come margins EBITDA our to for get on as years to profitability technology and growth over in best creating future value X just for includes yet people

With that, open the your questions. let to us call now

Operator

first Greg with Instructions] from [Operator question Peters James. Our is Raymond

Sidney Schultz

is Greg. This on Sid for

that we've the expanding called of differences in seen collectible And differ grow if your business? you the loss as ratio any cohort part had the that offerings loss make in from You space. your anything what that post-XXXXs compared to pre-XXXXs or might out historically just profile curious

McKeel Hagerty

the these been why segments It's in Sid. of build today. models. sophisticated program. on for being And existing We've lot this for McKeel is more you thanks pricing running Hi, experiments using and years a

the going go that coming the accept. our of of way forward, we we can kind we to pricing now, As have models be right aperture They're don't but for the them. vehicles opening we're of types

you cost And the in you to early those different how ratios standpoint. structure be in and you could the loss results we is so that The of an range the segments. build able to idea overall normal them slightly pure from handle while that pricing at phases, from of expect sort our build look

be model we're different, will the that's slightly ratios loss building. business new but So that

Sidney Schultz

if us stable it again the with XX% then Or And is share from last year? steps maybe up we in XXXX? can saw quota you remind Okay. what just the

Patrick McClymont

up It the and year to last stepped ceiling. XX%, that's

those up. get policies the So timing what's happening XX% that signed, under this any just when were based year is customers of weren't stepped they on --

a be a of across now tail XXXX, we're at XX% little it board. So the but in will bit

Operator

question next Securities. Maxwell is from with Truist Fritscher Our

Maxwell Fritscher

I'm Mark calling for in Hughes.

you XXXX? can the but for Sorry if figure live of missed gross I for the this, value provide auctions full the year a sales of

Patrick McClymont

Live auction total sales?

Maxwell Fritscher

Yes. that's been I I'm in past. believe just given the curious.

Patrick McClymont

think we've we've think we've sales, but I think full I a disclosure -- don't that the got as I number. closed No. disclosed don't individual of

McKeel Hagerty

Yes.

auctions we're financing. that would million live a the plus and So $XX year full include sharing Max, number online of some for

Maxwell Fritscher

Right.

makes sense. That Okay.

to the motor just as be very e-mail for And your everyday the I CPI so my of come would price question, it your take it that numbers parts. thoughts me shows just they're inflation still is and from insurance February And my bit saw model through vehicle those repairs is leads -- are outpacing you so a and cost know continue still drivers. But to cooling? helpful. to ensuring I different that around able much

McKeel Hagerty

Yes. see some continuing priced are single-digit They're of No, seeing, And But standard how thank turmoil. in across -- it's catch-up is jurisdictions. amount on industry to will I the -- a expecting. lower the increases XXXX. that big of rate much, playing now. noted, you. yet, through industry lot adequately but lot a right than make as -- continuing We're march a significantly the -- the all we're we sure you're higher probably as some is reacting think, than But a people you in

there, our We competitors. But -- partner noting with these companies. we're and one really is of lot They're are that these peers. our not a thing

to all them And of well. We're for to taking. rate very, continuing that business they're we're aware customers the trying open their serve actions very for just and so be

Operator

next Our JPMorgan. is [Operator Pablo question Instructions] Singzon from with

Pablo Singzon

and that cover subsidiary much up. sense now? of business there, was I the that just are mean could you flow everything today we you're if set new -- up? could what heard I the the that question, scores will of terms sort And acquired, the but algorithms could First the of wondering business that underwriting assume sense and turning is written I new set through in premiums away a give you're post-XXXX of once about suppose you you away a potentially how And turning you of once

Patrick McClymont

Yes.

what that's that way the overall of our it is, is about TAM So think we and talked kind we've mid-XXs. about now

think we includes think XX million vehicles That the I it's out that there. definition. are full

about us TAM. product full is efficiently the to that step the of launch think it tactical and this new to so the way acquisitions more product, And new serve kind CNIC to allows

grow we're think of pretty at we of And that things current So allows us thousands our funnel this at. about it's that hundreds to thousands types to of we're because the growing been confident continue we've that of quotes, -- quotes just rates year. make saying it's don't for to no right? So per of hundreds the our hit sense program, that and

when having And -- yes, so a say, we access to it our by to us product continue us market path. and want growth allows allows that to that to continue

Pablo Singzon

the right, the less a Would or of coincides assumption to that actually that to the be Okay. with where most you're funnel make? of very fair top that of seeing Is more the TAM, it vehicles distribution newer. are say fair

Patrick McClymont

of top is the is funnel TAM So question? pro of the rata your kind with

Pablo Singzon

the top market? is like sort that with of distribution overall vehicles in line Correct, of post-XXXX of very or Correct. majority the collector funnel of where your

Patrick McClymont

direction, expect continues that Yes. and on their -- there's there the trend a vehicles that it to some home, things while. for been of The those right? And than activity, they've they've been the as have newer velocity more new found you'd in

McKeel Hagerty

just vehicles look it, the in we're just sheer of what we're the future. ready this types where build look TAM. numbers and our And you interested And is 'XXs, our to increase for. they -- that's 'XXs, McKeel, just of we're the significantly and at sheer those the that's That's XXXXs. you get at in seeing that's decades, And trying Pablo in,

Pablo Singzon

Yes.

question growth XX%. me. last for quarter, this Good And Okay. premium then

combination price up right? I'll in in growth. in sort on step-up that plus guess, that it whatever your pricing you're that, -- the the 'XX, should continues written from noticed are call in anything I just increases that part I think at I a pickup showing XX seeing exposure sort and of So meaning right? in we Is I there pricing book? there value there? about insured a benefit premium are X.X%, And guess, number, and agreed up of of assume values growth and, insured of, are Although points was vehicles

Patrick McClymont

Yes.

think that growth the similar and premium new million of had reflects terms of guidance in XXXX, written of that XX% I in So customer in we to XXXX, in X.XX excess provided XX% a that level -- the we've growth new customers. so XXX,XXX

something balance and we coming in of the then increases. through that continue size book and to So digits some equates to to the grow is rate, from flow and which value continues the mid-single the

Operator

back to reached for the closing like We turn would our to session. question-and-answer conference the end I over McKeel comments. have of

McKeel Hagerty

Thank all interest your for Hagerty. continued you and to support operator, thanks in you, and

differentiated the have stride to protect, that and their carefully We business prized sell beginning last model buy, as built X a its just highly is hit help we consumers over decades enjoy vehicles.

rates call, the creating on last insurance As revenue in retention, omnichannel our profits. mentioned of supports business our growth Membership profitability recurring delivers I through distribution of of and revenue growth, backbone our Hagerty. the base commissionable high and revenue excellent

a Marketplace trusted Hagerty are accretive rapidly but resources expect the will significant We market. and platform highly to become this growing business, today, become in eventually preferred seeing we

toward evolution for comps multiyear recent acquisition underwriting our members while with increasing continue our profits also the control flexibility CNIC. of decreasing over our and We

line underwriting premiums. products New commission profits will us top the enable growth more and of to fuel capture from

be mention and the remiss Hagerty I sign entrepreneur. to on the off, Hagerty X. of Before Louise Matriarch February my She mother of was passing would not I dear amazing an

take was. good as was around And was great right she ensuring was cars be care boats, she it usually my toys." would wooden of mother addition their "people predicted accurately the collector that ensuring who While business initial a because built

the and many have growth. profitable XXth decade few of emotionally, amazing to next she for weeks we year celebrate are tap execute are our just on the we that this as last lives difficult touched surface for the beginning grateful business we been While the and

see driving. look hope We results first to months. forward with stop quarter you Hagerty never Until in X and you at we events, to sharing future our then,

Operator

will conclude today's conference. This you. Thank

You may and disconnect your your at time, participation. lines this for you thank

Hagerty (HGTY) 12 Mar 242023 Q4 Earnings call transcript